investment insights

    Global Investment Strategy: Normalisation, not stagflation

    Global Investment Strategy: Normalisation, not stagflation
    Stéphane Monier - Chief Investment Officer<br/> Lombard Odier Private Bank

    Stéphane Monier

    Chief Investment Officer
    Lombard Odier Private Bank
    Samy Chaar - Chief Economist

    Samy Chaar

    Chief Economist

    As we head into autumn, tailwinds from reopening, fiscal and monetary support have fallen. Growth is normalising. China faced challenges in the third quarter.

    But stagflation fears look overstated, suggesting an economy where inflation is out of control and growth is near zero.

    Stagflation fears look overstated, suggesting an economy where inflation is out of control and growth is near zero

    We are very far from this. This year, growth should be around 6% in the US and 5% in Europe. It will still be above-trend in 2022.

    We believe price pressures recede next year and central banks should look through current high inflation figures.

    In short, we see this as a new stage in the recovery. Corporate profits and consumer savings are high. Governments are investing trillions in a green recovery. Central banks are only withdrawing support gradually.

    So while we are closely monitoring risks from supply bottlenecks, tighter financial conditions and excess leverage in China, we see no major slowdown ahead.

    We therefore maintain a constructive stance on risk assets.

    We favour value and cyclical stocks, particularly in Europe, and companies focused on the net-zero transition. We have also increased our exposures to Chinese and Japanese stocks.

    In fixed income, Chinese sovereign debt in renminbi, emerging market hard currency debt and select high-yield credit can all provide additional yield.

    As growth concerns fade by year-end, we believe the dollar’s depreciation trend should resume.

    With markets expected to remain volatile, we are positioning portfolios to weather short-term headwinds and seize opportunities for additional performance.

    And of course, sustainability remains key to every investment consideration.

    Important information

    This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
    It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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